UPDATE 1-Argentina central bank holds rate, to make decisions monthly

3 Min Read

(Adds details, economic context)

BUENOS AIRES, July 10 (Reuters) - Argentina’s central bank held its benchmark monetary policy rate stable at 40 percent on Tuesday, the monetary authority said in a statement, noting that the high frequency indicators it tracks suggested that inflation had accelerated in June.

In the latest set of changes since a leadership shakeup last month, the bank said that it would now make monetary policy decisions monthly, rather than twice-monthly, and that the next interest rate decision would be published on Aug. 7. It had previously been scheduled for July 24.

It said the monetary policy board would become a “resolutive body” rather than an “advisory body” and that each board member’s vote on monetary policy decisions would be published.

The moves come less than a month after Luis Caputo, a former finance minister, replaced Federico Sturzenegger as governor of the central bank amid a run on the peso currency that prompted the South American country to turn to the International Monetary Fund for $50 billion in financing.

The devaluation contributed to a surge in inflation that prompted the central bank to abandon its 15 percent inflation target for 2018. Economists now expect consumer prices to rise 30 percent in Argentina this year, according to a central bank poll, up from 27.1 percent previously.

“The monetary policy board recognizes the presence of risks of higher-than-expected inflation in the case of a higher pass-through of the exchange rate to consumer prices than is foreseen,” the bank said in its Tuesday statement.

The central bank added that it would “complement” its current inflation-targeting regime - which uses the interest rate as the sole monetary policy tool, with closer monitoring of money supply. It pointed to its recent hikes in banks’ reserve requirements as an example of that type of action.

Argentina’s peso currency closed up 2.1 percent at 27.33 per U.S. dollar on Tuesday, its strongest level in two weeks, due largely to investors’ interest in the dual-currency bond the Treasury Ministry is expected to issue on Wednesday.